Archives for January 2013

Second Superior Court Judge Holds that LLC Managers Can be Liable Under the Massachusetts Wage Act

For the third time, a superior court judge has weighed in on the question whether managers of limited liability companies can be held personally liable for the severe penalties provided by the Massachusetts Wage Act. Mark the score now as two to one in favor of such liability. On December 17, 2012, a Middlesex County Superior Court judge ruled that the Act’s failure to reference LLC managers like it corporate presidents and treasurers does not absolve those managers of personal liability.

“The touchstone of section 149 liability remains that ‘[e]very person having employees in his service’ can be liable.  I decline, therefore, to rule that there can be no individual liability in the limited liabiliy corporation setting as a matter of law,” wrote Justice Paul Wilson. Instead, the court concluded, claims of individual liability against LLC managers can proceed if those managers have responsibilities that are functionally equivalent to those typically performed by corporate presidents and treasurers. The court went on to conclude that a plaintiff’s claim against a high-ranking manager stated a plausible claim while one against his report did not, despite the fact that the latter individual was in charge of the company’s Massachusetts operations and supervised the employee at issue. [Read more…]

Public Employee Penalized Nearly $1 Million for $500 Theft

The phrase “crime doesn’t pay” seems to have little meaning in today’s cynical world. Maybe that’s why a public employee named James Flaherty, the former superintendent of the Haverhill Highway Department, thought it was a good idea to steal paving stones from his jobsite and use them in a private business he operated with his son. The employee estimates the value of what he stole at $500 or $600, but doesn’t deny the crime. Public retirement officials and the courts think that figure is irrelevant in light of the breach of trust perpetrated by Mr. Flaherty. The employee has been ordered to repay about $64,000 in retirement benefits he already received and, over the course of future years, will lose about $940,000 in pay.

“Flaherty’s actions undermine the public’s confidence in the integrity and honesty of all public servants. Running a criminal enterprise with his son by stealing material that he has control over as superintendent of the highway department is about as confidence shattering as can be imagined,” the court wrote.  

The decision was made under a Massachusetts statute that provides for pension forfeitures when public employees commit crimes in connection with their jobs. In Mr. Flaherty’s case, the link was unquestionable and the severity of the penalty is justified under the facts, in the court’s view. Interestingly, far more severe crimes by public officials that are not linked to job duties may not result in pension penalties. At the same time the court decided the Flaherty case, for example, it overturned a lower court decision that could have taken away the pension of a firefighter convicted of child sexual abuse. In that circumstance, the court held, the “reprehensible” conduct at issue did not violate the pension forfeiture statute.

Clearly, common sense seems to have taken a holiday here. We probably should not, however, blame the courts for this, since its function is to simply enforce the laws that the legislature passes. That body can always rewrite the law, something it commonly does when deficiencies in statutory text become patent by application of law to fact. Perhaps a new definition of ‘violation of the public trust’ is in order.